buss

1. Topic:
Estimating Budget
& Project Crashing
First of all, we will go through the
introduction of the project budget
estimation .
View Slides
Presented
By
26 Malik Usman
19
34
Abdul-Ahad
M Bilal

2. Introduction:
Senior management approval of the project budget allows the obtainment of resources to begin the
project.
A budget is a plan for allocating resources.
A budget is an expression of organizational policy, and control mechanism.
Budgets must be tied to achievement. Data must be collected and reported in a timely manner.

3. Introduction:
The required quantity of each, when they will be needed, and how much they will c
ost. Of course, there will be uncertainty.•In many fields, cost estimating methods
are well codified.
Sometimes, established relationships can be used as a first approximation, e.g.:Co
st of Building = ($/square feet) * (no. of square feet).
Developing project budgets is typically much more difficult than developing budget
s for more permanent organizational activities, since:.. The project budgeter canno
t depend on tradition... For multiyear projects, the plans and schedules must be set
at the beginning of the project life. (example: International Space Station)
 The PM must understand the organizational accounting system...
 The PM must be aware of both the resource requirements and the specific time
pattern of resources
 Usuage.
 Every expenditure must be identified with a specific project task.
There are two fundamentally different strategies for data gathering:.

4. Top-Down Budgeting:
Top and middle managers estimate overall project cost as well as costs of major su
bprojects that comprise it, via their judgments and past experiences.
These cost estimates are given to lower-
level managers who continue the breakdown for specific tasks and work packages.
Competition among junior managers can be quite intense (considered a zero-
sum game).

5. Advantages:
Quick, simple
Fair accuracy overall, though individual
elements may be in error.
Small tasks need not be individually ide
ntified.
Disadvantages:
Limited buy-in by junior managers.
Senior managers views may be biased.
Using data from dissimilar projects, or
old projects, can mislead.

6. Bottom-Down Budgeting:
Bottom-up budgeting is when all the departments or sections of a company create
a list of all their anticipated expenses and then each department’s list is totaled up
to create an overall budget. Bottom-up budgeting is often referred to as
participative budgeting since managers from each department need to help create
the budget.
Companies use bottom-up budgeting to ensure each individual department is
getting enough funding for their wants and needs. This kind of budgeting
encourages employees to think about their department’s goals. It also gets
departments to plan ahead for things like new hires, scheduling and projects.
Here is how to do bottom-up budgeting:
 Identify all of the company’s departments
 Instruct each department to create a list of expenses
 Total every department’s expenses
 Review each department’s budget
 Decide on a final budget

7. Advantages & Disadvantages:
 Greater buy in by low level managers
 More likely to catch unusual
expenses
 Need a good WBS
 Can lead to game playing when
individuals pad
their estimates in anticipation of
management
cuts.
 Management has a tendency to trim
the budget as
they have not originated.

8. Negotiating:
•Typically the budgeting process requires some
negotiation between the PM and senior management.
•This is because the PM will be better informed on
the technical details while management will know
more about the financial realities of the
business.
•Together they need to discuss the project
requirements and life cycle.
•If the project is heavily dependent on testing
and integration at the end, then its important
to not short change the budget for the completion
process

9. What is Budgeting ?
 A plan for allocating scarce resources to the
various endeavors of an organization
 A budget implies constraints
 Thus, it implies that managers will not get
everything they want or need.
 The budget for an activity also implies
management support for that activity
 The higher the budget, relative to cost, the
higher the managerial support.
 The budget is also a control mechanism
 Many organizations have controls in place that
prohibit exceeding the budget.
 Comparisons are against the budge.

10. Estimating Project Budgets:
On most projects,
 Material Labor Equipment Capital Overhead
Profits Bid
In other words
 Resources Profits Bid
 So budgeting is in effect, the task of
forecasting resources

11. Estimating Project Budgets:
Like any forecast, this includes some uncertainty
There is uncertainty regarding usage and price
Especially true for material and labor
The more standardized the project and components,
the lower the uncertainty
The more experienced the cost estimator, the
lower the uncertainty (and therefore the RISK).

12. Project Crashing
It is a technique to complete the
project in a short period. We will
discusss about it in further slides.
View Slides

13. Project Crashing:
Project crashing involves shortening the expected time
taken for a project. This is primarily done by adding more
resources to it. You may find diverse ways to add resources
to a project depending on what is causing the delay or
taking a lot of time. This needs to be done within the
constraints of budget and quality, and must be approved
and supported by important stakeholders.

14. Project Crashing:
“Crashing in a project is an activity that will shorten the
completion time of a project within the optimum cost
increase.”
You could allocate individuals from a different team to an
activity that needs to be sped up.
Crashing can also be done for individual activities within
the project. If shortening the length of that activity brings
down the time needed for project completion, then the cost
incurred is easier to justify

15. Project Crashing:
Crashing does not always involve adding resources. In
some cases, it can also involve reducing the scope of a
project. For example, the plan for a four-lane
highway may reduce its scope to build a two-lane
highway instead to reduce the
time required for completion and to meet immediate
needs.

16. Example:
There are projects happening all around
us. Projects frequently run into problems
or might need to be reprioritized or sped
up due to a range of reasons. One of the
prominent examples we saw in this was
with developing vaccines. As the COVID
pandemic was spreading around the
world, several companies and countries
were working on projects to develop a
vaccine. A process that would normally
take years was brought down to under a
year by doing things differently.

17. Project Crashing Management
Stages:
When the circumstances where a project
crashing becomes evident, then you
would need to do a crash analysis to
identify what changes need to be made,
which activities should be sped up, how
they could be sped up, what would be the
cost and more such details.

18. Project Crashing Management
Stages:
Crash Objective
The first stage of the project crashing is to understand the need for it
and the objective in terms of what is to be accomplished. If the scope
of the project has reduced, then there may not be a need to add
more resources to speed up the project. How to use the workforce or
what amount of work can be outsourced etc. can be estimated at this
stage.
Critical Path
Each project will have a critical path identified at the beginning. This
chain of activities is what needs to be crashed to speed up the
project. Crashing an activity outside the critical path does not help in
reducing the project time

19. Project Crashing Management
Stages:
•Find Crash Limits
Each activity will have a crash limit. This is the point beyond which an
activity cannot be crashed. Understanding this information will give you an
idea of how much the project can potentially be crashed.
•Choose the Economic Option
Once you have an idea of how much each activity can be crashed and the
cost associated with it, it becomes easy to identify how many activities to
target and to what extent they need to be crashed to meet the objective at
the most reasonable cost.
•Get Approval from Sponsors
Once you have identified the most reasonable or most viable crashing plan,
then you can convince the key stakeholders of the project and get their
approval to implement it.

20. Why Crashing Matters?
 When well-planned and executed, project crashing can
achieve impressive feats.
 Projects routinely don’t go according to plan or change
scope while they are in progress. You should be able to alter
your project to meet changing conditions and evolving
requirements.
 With rapid technological changes and changing customer
needs a medium- or long-term project that does not need to
be altered would become a rarity. The capability to alter
projects according to changing requirements will give the
organization a definite advantage over its competitors.

21.  Larger projects involve a lot of teams and processes
working and depending on each other. Changing
anything in such an environment can have a
cascading effect on other aspects of the project. This
is what makes project crashing a key skill to have as
a project manager.
Why Crashing Matters?

22. Any
Questions
You are free to ask
…..